Smaller banks in developing Asia deliver best total returns for investors in Q2

Smaller banks in developing Asia delivered some of the best returns for their investors in the April-June quarter, as global equity markets remained volatile due to US tariff policies.

Bangladesh-based Midland Bank PLC topped the Asia-Pacific regional bank stock performance league table with a 72.8% quarter-over-quarter gain in total return, according to S&P Global Market Intelligence data. The Dhaka-headquartered bank had a market capitalization of $140 million as of June 30.

Indonesia's PT Bank Bumi Arta Tbk followed with a gain of 54.3% in total return and market capitalization of $170 million. Pakistan's Faysal Bank Ltd. accounted for a total return of 49.8% with its market capitalization at $370 million.

Korean majors

Seoul-based Hana Financial Group Inc. ranked fourth with a total return of 46.9% during the quarter, while two of its local peers, KB Financial Group Inc. and iM Financial Group Co. Ltd., also made it to the top-15 list, data shows. The list included two banks from China and four banks each from India and Pakistan.

Hana Financial Group and KB Financial Group are among South Korea's largest financial institutions.

The KOSPI Composite Index, South Korea's key equity benchmark, reached a near four-year high after the country's central bank cut its policy rate by 25 basis points to 2.50% on May 29 to counter the weakening growth outlook amid tariff threats. This was the second cut this year, which helped the benchmark stock index rise 23.4%.

While the volatile international trading conditions will drag on growth in South Korea, the risks Korean banks face are relatively modest, according to an April 15 note from S&P Global Ratings.

Gainers and losers

Meanwhile, in Pakistan, the KSE-100 index gained 12.8% during the second quarter, outperforming India's benchmark NIFTY 50, which added 8.5%.

The data show that five of the 15 worst-performing bank stocks in Asia-Pacific were Japanese lenders, while two each were based in Bangladesh, the Philippines, Thailand and Malaysia.

The list of Asia-Pacific banks with the biggest drops in total return included Japan's Hokkoku Financial Holdings Inc., Procrea Holdings Inc., The First Bank Of Toyama Ltd., Yamaguchi Financial Group Inc. and Aichi Financial Group Inc.

With a market capitalization of $2.27 billion, Yamaguchi Financial Group, based in the southwestern city of Shimonoseki, was the largest of the five Japanese regional lenders.

Japanese bank stocks underperformed the broad market, with megabanks, such as Mitsubishi UFJ Financial Group Inc., barely holding steady during the quarter, while the benchmark Nikkei 225 recovered after taking a hit from the tariff uncertainties.

Bangladesh-based Al-Arafah Islami Bank PLC. was worst performer, declining by 27.2%, and shrinking its market capitalization to $160 million. It was followed by the Philippines' China Banking Corp., down 25.0%, and India's Punjab & Sind Bank which fell 24.2% during the same period.